Powering corporate agility

As CEO of Ballard Power Systems, Randall MacEwen leads a company focused on providing innovative clean energy solutions with fuel cell vehicles. Known as an industry trend-spotter, he started his career as a corporate lawyer, but jumped client side after six years to enter the clean energy sector. From 2001 to 2005, MacEwen served as Executive Vice-president of Corporate Development at Stuart Energy, leading growth in hydrogen production and the company’s eventual merger with Hydrogenics. As the sector shifted to photovoltaics (solar energy), MacEwen took the executive helm at Solar Integrated Technologies, a commercial rooftop solar business, which saw annual revenue grow from less than $10 million to $95 million under his leadership. Following the acquisition of the company in 2009, MacEwen consulted for various clean-tech companies looking to improve their business. In 2014, he was named President and CEO of Ballard, which been researching and developing fuel cell technologies for over 30 years. In 2017, Ballard became the first fuel cell company to power buses for more than 10 million cumulative kilometres—equivalent to 250 trips around the earth. In this Ivey Business Journal interview, MacEwen talks with Ivey Professor Gerard Seijts, Executive Director of the Ian O. Ihnatowycz Institute for Leadership, about the leadership skills needed to navigate disruptions in today’s ever-changing business environment.

Gerard Seijts: What are the significant disruptions (technological, social, political, environmental, etc.) you see on the horizon that are likely to have wide-ranging effects on businesses and society?

Randall MacEwen: Ballard is sitting at the intersection of three mega-trends: climate change, air quality, and the electrification of air propulsion systems. I’ve been in the clean tech industry for 20 years, and while we’ve always talked about the triple threat of climate change, air quality, and energy security, the need to address these issues has taken on a new urgency, particularly in the last year.

We’re in a new era with climate change: with the exception of the United States, we have global consensus on the need to keep the global temperature increase below 2 degrees Celsius. That’s going to require deep de-carbonization, and in order to achieve that, there needs to be major transformation in the energy, transportation, and industrial manufacturing industries.

Air quality is linked with CO2 emissions and with other emissions that also impact air quality, such as particulate matter. The problem with air quality has accelerated and a number of countries have identified a need to ban internal combustion engines. The United Kingdom, France, Norway, and the Netherlands have all announced that they are moving away from internal combustion engines, planning to have them completely eradicated between 2025 and 2040. China announced as well that they’re developing a timeline for phasing out internal combustion engines.

The changes are also happening at a municipal level. Cities are enacting policies to restrict vehicles with certain propulsion systems, limiting them to specific times or specific conditions, or not allowing them in the city at all. In 2017, 15 cities—including London, Paris, Barcelona, Los Angeles, Vancouver, Seattle, and Mexico City—announced that they are transitioning to exclusively zero-emission buses as of 2025.

The need to reduce CO2 emissions and improve air quality is driving the trend to electrify propulsion systems, not just in cars, but also in buses and trains—any application that reduces emissions. But electrifying vehicles isn’t the only change in the automotive sector. There’s also a push to make vehicles lighter and to equip vehicles with autonomous driving. And these efforts are complicated by another trend that I think could be really transformative—transportation as a service.

Ride sharing is a part of transportation as service, but the shift is larger than just that. It involves the whole model of transportation, particularly in urban environments with high population density. The next generation doesn’t want to own a car; they want to tap their phones and get a ride. That model involves greater use of vehicles. I think the average vehicle today is used about 5 per cent of the time, but if a few vehicles are servicing a generation that prefers rides over ownership when they need transportation, the vehicles that are on the road will be used much more. In addition to being on the road for many more hours, those vehicles will also travel a greater range. As a result, a number of things that matter to us in the energy and transportation markets—the pursuit of clean energy and zero-emission technology—need to favour solutions that provide long range and fast refuelling.

Another disruptor, which has been talked about a lot but is, I think, still understated, is China. The profound implications of the increasing middle class in China, the continued economic growth in the country (although some question whether that is sustained growth), the migration of people out of China and, in some cases, the migration of capital out of China all have interesting implications. The impact on real estate, shopping, and other markets is fascinating.

Any business that is international—not global, which means you’re everywhere, but international, which means you’re in selected markets—is probably missing the largest market if it doesn’t have a China strategy. I think China will exceed the United States as the largest consumer market fairly soon, but it’s already the largest market in other areas. As an example, in our market, in North America, there are 5,100 new buses every year. In Europe, there are about 13,500. In China, depending on which numbers you believe, it’s 400,000 new buses every year. The scale of the Chinese market is so large that you have to consider how you can win in China: can you win in China, first of all, and if so, what’s the right business model?

The interesting thing about these mega-trends is that they will not end; they will go on from age to age. They are global and they are converging. So, the issue of climate change, for example, isn’t something that gets addressed in two years and we’re done with it and on to another trend. The trend is sustainable… pardon the pun.

GS: In light of these disruptions, what are the leadership requirements—the competencies, talents, and character dimensions—necessary for leaders to effect positive change in their organizations and in society?

RM: All companies in all businesses today have to deal with the challenge of keeping pace with disruption and the speed of business. There are a number of issues to consider in any organization looking to improve clock speed—cultural changes and risk tolerance, for example. If you look back about 20 years at the companies that were profiled in business literature as successful—like those studied by Jim Collins in Good to Great—you realize that many are long-standing industries—Coca-Cola, car companies, or resource-based companies. For those companies, the question was, “How do we move the needle from 4 to 6 per cent growth?” Or even 2 to 3 per cent. But the skill sets that enabled companies to differentiate themselves in that environment are different from the skill sets needed today. Today we’re talking about how to adapt in a changing environment, with the scale and breadth and depth and urgency of change that is current.

In my industry, traditional automakers are at high risk, in my opinion. They are capable companies, but in many ways, they don’t have the ability to move fast enough. The big auto companies have to invest in a number of themes at the same time: reducing the weight of vehicles, electrifying vehicles, fuel cells, and autonomous drive, while also exploring what the ride-sharing model means for them. It’s highly capital consuming.

At the same time, not just auto companies like Tesla, but also companies like Apple and Google—and start-ups—are saying, “There are other ways to do this.” Sure, the existing incumbents have scale; they have engineering expertise and they know the market well. But there are other ways to do what they do, which is—coming back to the point—highly disruptive. I think there’s a challenge for incumbent OEMs to decide where to spend their capital and how to spend it in a way that meets the urgency and sustains success in the long run. The newer companies have other challenges, including capitalization and understanding the market requirements, but they are nimble and can move a lot faster.

Just sticking with the automotive theme, there are many skunkworks projects that are looking at new models of transportation—like what was done with phones, for example. Changes are going to occur rapidly, and some of the large automakers are already out front. Volvo recently announced that they are going to 100 per cent electric vehicles now. Beijing Auto and three or four other companies have made similar announcements. There’s a phase-in period, but these companies will completely eliminate internal combustion engines. Automakers can try and resist the changes; some of them may wait and be more methodical—maybe roll out fleets of electric vehicles two or five years from now—but they do that at their peril.

Another need is for leaders to take in competing and converging macro factors, whether they are political, social, economic, or business industry related. Leaders need to synthesize those to understand what they mean collectively as a fabric for their business. It’s not easy to forecast—to use a hockey analogy—where the puck is going to be.

“Leaders still need to do a very good job managing the core business, but their thinking needs to be more external and more macro. This involves looking not just around the corner, but also up and down and all around.”

GS: But a critic would say that should have always been the case, right?

RM: Yes, it has been important, but the level of complexity has changed, and the speed of change has increased. What that means, in my mind, is that rather than looking annually at the macro drivers affecting the industry and doing a simple PEST analysis, you need to be synthesizing the drivers more often—weekly or monthly. The number of touch points you need to get that information and get it quickly have also increased. Information in your industry is not going to make visible imminent change that you don’t know about today; you need to be part of different networks, including those outside your industry. As a leader, you need to be the tip of the spear in understanding what is going to impact your industry and your company.

Leaders also have to ensure the business is responsive and adaptable. Of course, you can’t have a business that responds on a weekly basis. That’s not sustainable. But companies need to be flexible and change in response to the macro environment. That requires leaders who have high learning intelligence or, as I call it, “learning agility.” Leaders need to question their own assumptions and promote executive teams that are open and honest. There needs to be trust among the team so they can safely question some of the core assumptions. The point is to consider what we are not seeing, what could come that might change the current situation.

Leaders still need to do a very good job managing the core business, but their thinking needs to be more external and more macro. This involves looking not just around the corner, but also up and down and all around. The team needs to ask, “Where can we get signals or indicators of what change is coming, and how do we synthesize that sometimes very conflicting information in a way that’s understandable for our team, our customers, and all of our stakeholders? And how do we synthesize the information in a way that allows us to articulate and execute a strategy against the change?”

I recently heard a speaker propose that you don’t need to be the company that defines disruption or comes out with a major innovation, but you need to be the company that spots it and incorporates it in your business very quickly.

GS: How would you create comfort when the information needed to make the decision is not yet available or is ambiguous?

RM: Some of that involves risk tolerance. We’re going to have to be comfortable making decisions with less certainty. In a disruptive environment, we have to be open to making mistakes. They can’t be fatal mistakes, and you have to be able to recover from them if you get them wrong. But leaders need to create environments where people feel empowered to make decisions, and where, if there is a mistake, people aren’t punished for it. Rather, leaders need to help the company learn from the mistakes and evolve.

Companies that don’t accept mistakes are likely the companies that keep analyzing until they have a 95 per cent confidence interval before making a decision. Companies in growing markets—like China, for example—are more entrepreneurial; they take higher risk and move faster to grab market share and seize business opportunities. Companies vary, obviously, but my experience has been that responsive companies generally don’t need the 95 per cent confidence interval that larger, more established companies seem to need.

Leaders need to be comfortable making decisions in grey areas and comfortable making decisions when the analysis is still being baked. And they may even need to be comfortable with not knowing what the right decision outcome is. The confidence interval could be 70/30 or 80/20, but it’s not going to be 95/5.

GS: Reflecting on your own organization in a time of disruption, how do you shape an agenda for talent development? What are the current approaches to leadership development that you believe are most effective?

RM: We started leadership and talent development at Ballard about two years ago. We committed to it as a priority and invested a lot, but our approach wasn’t novel. The investment was foundational, using traditional tools that are offered by a number of organizations. We brought in facilitators to help with team building and establishing trust at the executive level, and we used coaches to support individual executives. We also held meetings—a lot of them—but we held more meetings that were focused on change and reduced or eliminated meetings that were just routine. Many of the meetings were off-site and dealt largely with strategic alignment.

To build talent, we brought in outside support to develop different skills, such as accountability. We also implemented performance management, career conversations, and mentoring programs. We weren’t cutting new paths here, but I do think in companies our size, the foundations are really important. You have to get things like trust and team building and accountability right before you can be a little more creative with some of the approaches.

GS: You described your approach as traditional, and yet yours is a non-traditional organization in a non-traditional industry. I understand that trust, as you discussed earlier, is absolutely necessary to have candid conversations, to tolerate mistakes and quickly learn from them, and for people to be accountable and demonstrate learning agility. What else are you doing to create the comfort and the skills needed in the disruptive environment we’ve been talking about?

RM: There are three things that come to mind immediately: thought leadership, culture change, and speed. Thought leadership is actually an industry-wide initiative. It’s not just within our company, but it impacts our employees a lot. Over the last year or two, we’ve made efforts to show vision and generate thinking. It has involved, for example, white papers, speaking at conferences, and taking on challenges within the industry, such as the commitment to make 30 per cent of all heavy-duty motor vehicles fuel cell electric by 2030. That’s our 30 by 30 plan. Showing vision and thought leadership is one way to capture and reignite what I would say is passion. Another initiative is our “Challenge Solving Innovation Sessions.” These are sessions that bring together people from different departments to brainstorm and solve problems. It was just something that happened in R&D, but we’ve grown the idea. Everyone is on the CSIS team and twice a year, groups present their ideas in a competition. We’re generating discretionary effort from our team because they are working for a company they believe in, making a difference they have envisioned.

Vision is one thing, but to deliver it, we need culture change. We spent a lot of time over the last few years making culture change. We identified our existing culture and established our objectives—what we wanted to achieve, both long term and near term—then determined what culture we needed to meet our objectives and achieve our vision. We sorted out the changes we needed to go from the old culture to the new. It’s a question of both what we need to stop doing and what we need to start doing.

To make the change, we went through a process of defining the key cultural values we need as an organization. It was a high-value process of bringing people together at the same time—a team-building exercise of defining what we are. We came up with our cultural values and distilled them to five, choosing specific language to describe them: “Listen and Deliver” is all about customer centricity; “Quality” requires that everything we do has quality; “Inspire Excellence” is most relevant to this conversation—it’s about urgency, passion, and showing leadership; “Row Together” captures the idea of trust we were talking about; and “Own It” is the idea of accountability, which we addressed with our foundational skills development.

The five key phrases are used daily, weekly, monthly in everything we do. We look for people to be demonstrating these values and reinforce them. The values are also part of our performance management: you are graded and compensated by how well you do against our values. A lot of people talk about cultural values and they are hollow words on a piece of paper, but at our company the values are real and are central to what we do.

We’ve been trying to add to the work in culture change with some practical changes. We talk a lot about safety and innovation and, more recently, about the sustainability of our own business. The most pressing and challenging issue right now is how to speed our business up. If it takes us two years to develop a product, how can we make it one year? Or 18 months? If it takes us three weeks to get a sophisticated proposal out to a customer, why can’t we do it in one week?

We’ve mapped our different processes to find opportunities to streamline the process. We have made a very significant investment in continuous innovation and continuous improvement. We now have around 50 people in our company with Six Sigma belts, and we’re using Six Sigma skills to “lean out” a number of production processes and “stream out” waste throughout the company.

I thought it would be a challenge to make culture change in a company that is 38 years old with a lot of long-term employees, but that actually went a lot easier than I thought. The challenge I’ve been struggling with as a leader, and our team has been facing as team leaders, is speeding the company up. If I could snap a finger and have one thing change tomorrow that would help our business, it would be improving our clock speed.

Frankly, I’m a very impatient person, which can be even more of a challenge when you’re a leader. I don’t understand sometimes why it takes so long to do things—until we get into the details and then I see the reason for it. We always say, “Speed, but you can’t compromise any of our values.” We especially can’t compromise quality. We can’t make mistakes that lead to compromises in integrity or compromises in our reputation.

Also, as a public company with an independent board of directors, we have to follow the right, appropriate corporate governance. And sometimes that takes time too. There is a necessary process and procedure to things. It can be paralyzing for much larger companies; fortunately, we’re not that large yet. Hopefully, we will continue to always have a kind of entrepreneurial, disruptive mentality.

GS: What role should the business school play in light of the disruptions we have discussed? What should we be doing to educate leaders who can create positive change in this environment?

RM: Part of our discussion earlier focused on the importance of learning agility and adaptability. I think one thing to consider is developing the ability, whether it’s at business school or potentially even earlier, to teach people learning agility and how to be more adaptable. That leads to innovation.

And to make innovation happen, you need change management. Ballard is not the first time I’ve gone through culture change. If it isn’t already, I think change management should be a theme or an area of focus in business schools—change management, organizational management, and talent management. Understanding the structure of a company’s organization and the relationship between leaders and managers and how that cascades down through the organization, and having the skills to manage people are critical components of change management. There has been a lot of talk about this over the last 20 years, but in my opinion, some organizations still don’t respect or understand the value of skilled people management.

Another area worth developing, I think, is multi-disciplinary training. Business schools bring together topics such as leadership, entrepreneurship, and sustainability, but those are really three converging areas. I think it’s also important to develop students with multi-disciplinary talent. That is valuable.

In our industry, people in key roles who have both an engineering degree and a business degree have significant impact on the organization. They bring sophistication to customer engagement, product development, and providing context with the markets.

Actually, one of the reasons I went to Western was to do the joint law and MBA program. I did well in the first year of law school and qualified for the joint program, but I wanted to just get out and make an income. I didn’t want to do the extra time. I regret that decision because I’ve seen the power of the combination.

Another type of multi-disciplinary preparation is co-op placement. We hire several co-op students every year—engineering students usually. They add a lot of value to our company, and many of them end up staying with the company. Co-op programs give students a chance to get real-life learning, to feel what it’s like to be part of an organization, and to see some of the opportunities and challenges that come with that.

There is also so much room for improving communication, regardless of what course students have taken or what discipline they’ve been in. People don’t come out of school—whether it’s engineering, business, or law—with a lot of soft skills. I took negotiation at Western and I’m so glad I did. It taught me a lot about communication, and communication is a critical skill. If you want your message to be sticky, have impact, and make change, you need to communicate well. That includes e-mails, public presentations, and leading meetings, and it especially includes structuring argumentation.

GS: These are valuable observations, applicable in all markets. Is there anything you recommend that specifically would prepare students to add value in organizations that are operating in a very disruptive environment?

RM: Business schools offer skills in leadership, sustainability, and entrepreneurship, but also having industry-related specialization would be powerful. If someone wanted to be in an industry—say, transportation—that person would bring more value to the company if, in addition to getting all the foundational pieces in a business school, the person also had context and understood some of the key issues in the industry. A co-op placement could help, but if it’s reasonable, it would be great if students could get that level of specialization in school.

Also, I talked about Ballard having thought leadership in our small industry, and I see consulting firms provide thought leadership in talent management and accounting and finance, for example. But I don’t see business schools doing much of that. Thought leadership in different industries and with different ideas, such as sustainability, for example, would be powerful for schools—not just in terms of what they can teach students, but also in how the schools engage with business.

Again, these ideas aren’t specifically related to the disruption that we’ve been talking about, but if business schools did focus on specialization or thought leadership, I would focus on the areas where the disruption is occurring.